When determining the full cost of a cost object:
A) indirect costs are not allocated.
B) none of the options are correct.
C) the indirect costs need to be allocated to the cost object on the basis of its usage of a chosen cost driver or drivers.
D) non-manufacturing costs are always expensed in the current period.

Question

Quizplus · Accepted Answer

Indirect costs need to be allocated to the cost object based on its usage of a chosen cost driver or drivers in order to determine the full cost of the object. Non-manufacturing costs may or may not be included depending on the nature of the cost object being analyzed. Option A is incorrect because indirect costs are a necessary component of determining the full cost of a cost object. Option B is incorrect as there is a correct response. Option D is incorrect because non-manufacturing costs may or may not be included depending on the purpose and scope of the analysis.

When Determining the Full Cost of a Cost Object